McVitie’s owners have warned that a combination of volatile wheat markets and broader inflationary pressures will cause more pain for biscuit lovers as prices are set to rise further next year.
Salman Amin, chief executive of London-based snacks maker Pladis, whose brands include Digestives, Hobnobs and Jaffa Cakes, said prices of the group’s products were expected to halve again in 2023 as they had this year.
Pladis, owned by Turkey’s Yıldız Holding, is home to UK-based brands such as Ülker, Godiva Chocolatier and DeMet’s Candy Company.
Amin said in an interview that the pressure on prices was partly a result of contracts signed when the wheat market peaked after Russia’s invasion of Ukraine.
“Wheat prices are back to pre-pandemic levels but we have contracts that extend until 2023. We had to make some decisions three or four months ago. It was very risky.
Amin declined to disclose the price increases Pladis has made, but food groups such as Unilever and Kraft Heinz have reported double-digit year-on-year increases in the prices of their products this year.
But the challenge facing light manufacturers is related to a wider backdrop of supply chain disruptions, cost increases and inflationary pressures. “While wheat prices have normalized, other challenges remain, including the supply chain,” Amin said.
“I believe we will see this [economic environment] Another 12 to 18 months. I am quite bearish or realistic about what 2023 might bring,” he said.
Pladis was formed in 2016 after Yıldız Holding bought McVitie’s owner United Biscuits from its private equity owners two years earlier. Amin took the helm in 2019.
Partly as a result of these conditions, Pladis is putting more emphasis on smaller “on-the-go” versions of its products, selling them at lower prices than full packs, as it accelerates new product development.
In the UK, these little packs also cater for impulse snacks, such as Jaffa Jonuts, a variant of Jaffa Cakes sold for around £1.50 for a pack of four, as well as small packs of Iced Gems, Mini Cheddars Crunchlets, Mini Gingerbread and Delights.
Digestives and Hobnobs are sold in Nigeria in “on-the-go” sizes, while US consumers can buy smaller packs of Flipz Clusterz and Turtles.
“Smaller packaging sizes keep us in the same space [in stores] Chewing gum and others,” said Amin
“Smaller product sizes are sometimes restricted by our ability to pack smaller sizes with packaging machines, but we’re rolling them out at more sites and will have that capability at almost every one by the end of 2024. [country].”
In the UK, food prices have been stagnant for a decade, Amin said, presenting a hurdle for companies that need to change consumer expectations in an inflationary environment.
“Prices have been completely flat in the UK for the last 10 years. There has been no real price rise over this period and consumers are used to certain price points – how do you redefine the definition of value now?” He said.
But there has not been a “mass shift” away from Pladis’ products to cheaper alternatives, he said.
Like its competitors, Pladis is also trying to move into healthier snacks as governments and consumers try to combat obesity. This year, it reformulated Jacob’s Twiglets to contain 60 percent less salt and launched a low-sugar version of Rich Tea Biscuits.
“At the end of the day, innovating low sugar and low fat without trading off taste is a very difficult trade-off,” said Amin.
“These are multi-year projects,” he said. Currently 5 percent of Pladis’ portfolio boasts “low” levels of certain ingredients, but that is expected to rise to 15 to 20 percent in three to four years, he said.
“Our savory portfolio, brands like Jacob’s Cream Crackers and Mini Cheddar’s Nibbies, are growing very well — at double-digit levels — with no sugar and very low fat,” he said.